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The Amenity Value of Climate to German Households

  • Katrin Rehdanz
  • David Maddison

This study uses the hedonic approach to measure the amenity value of climate in Germany. Unlike in earlier research separate hedonic wage and house price regressions are estimated for relatively small geographic areas and formal tests undertaken to determine whether the coefficients describing the impact of climate variables are homogenous across these areas. Evidence suggests that German households are compensated for climate amenities mainly through hedonic housing markets. Given that climate is largely unproductive to industry and few industries spend more on land than labour this is consistent with what theory would predict. Throughout Germany house prices are higher in areas with higher January temperatures, lower July temperatures and lower January precipitation. In East Germany wages are higher in areas with higher January precipitation. The full implicit price of climate variables however is very uncertain.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.41358.de/dp414.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 414.

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Length: 21 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp414
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  1. Maddison, David, 2003. "The amenity value of the climate: the household production function approach," Resource and Energy Economics, Elsevier, vol. 25(2), pages 155-175, May.
  2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  3. Cragg, M. & Kahn, M., 1995. "New Estimates on Climate Demand: Evidence from Location Choice," Discussion Papers 1995_34, Columbia University, Department of Economics.
  4. Jeffrey Englin, 1996. "Estimating the amenity value of rainfall," The Annals of Regional Science, Springer, vol. 30(3), pages 273-283.
  5. Maddison, David & Bigano, Andrea, 2003. "The amenity value of the Italian climate," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 319-332, March.
  6. Schnare, Ann B. & Struyk, Raymond J., 1976. "Segmentation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 3(2), pages 146-166, April.
  7. Graves, Philip E., 1980. "Migration and climate," MPRA Paper 19916, University Library of Munich, Germany.
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